Okayama Economic Review
Published by the Economic Association of Okayama University

Online ISSN 2433-4146
Print ISSN 0386-3069

On Construction of Stochastic Pricing Operator from Asset Market Data

谷川 寧彦 Faculty of Economics, Okayama University
Constructing IMRSs from asset market data has an advantage, that is we need not rely on troublesome consumption data. When we observe a subset of the market, however, there are two problems. First, the constructed IMRSs may not price the other assets. Second, we may also end up insufficient number of factors. These two difficulties lead to mis-pricing of APT. We find an IMRS constructed from only stock market data does not price the Government long-maturity bonds. Using both the stock returns and the one-month Treasury bill returns, this mispricing disappears. We also find that five factors extracted from both the stock returns and the Treasury bill return satisfies the condition for APT implied by the Euler equation.
論説 (Article)